BlackRock’s research team said it is now negative on long-term U.S. government bonds. They worry that a big wave of borrowing tied to AI projects will push up borrowing costs in the United States.
Big tech companies are expected to take on hundreds of billions in new debt to fund AI work. Even if those companies stay strong, this extra borrowing comes when public debt is already very high, which raises worries about too much debt in the whole financial system.
BlackRock said more borrowing by both companies and governments will likely keep interest rates higher. The firm moved to an “underweight” view on long-term Treasuries for the next six to 12 months and warned that higher rates make AI investment more expensive and make the system more fragile.
Still, BlackRock expects AI to help U.S. stocks and boost some parts of the economy over time. It also changed views on other markets: it is more negative on Japanese government bonds but more positive on emerging-market hard-currency debt because those governments have healthier balance sheets.